Development of anti-bribery and competition law compliance programs
Anti-bribery regulations can put your company in a tough position. Over the past few years, governments have enhanced their crackdown on bribery and other forms of corruption based on the US’s FCPA*1 and other laws. As a result, it has become necessary for companies to invest in and develop appropriate anti-corruption compliance programs. Management responsibility and commitment are significant factors in the success of these programs, as are internal controls related to financial reporting. In the US, the Federal Sentencing Guidelines, which were established as a standard for sentencing, stipulate that companies with appropriate compliance programs may have their sentences reduced. The UK Bribery Act*2 requires companies to follow ‘appropriate procedures’ to prevent corruption. In the future, all international companies will be required to develop a series of management cycles, including cycles for the formulation, dissemination, monitoring and review of compliance programs, allocate management resources to support these cycles, demonstrate self-governance, and establish systems for responding quickly when a risk comes to light.
Our forensic services practice provides support for the introduction of anti-corruption programs based on PwC's global experience in analysing, investigating and remediating bribery and corruption cases.
*1 FCPA: The Foreign Corrupt Practices Act. Enacted in the United States in 1977, this law helps to ensure fair business transactions by prohibiting the bribery of foreign civil servants etc. All US companies and foreign companies that conduct businesses in the US (in particular, companies registered with the U.S. Securities and Exchange Commission, Japanese companies with US offices etc.) are subject to this act.
*2 The UK Bribery Act: This law, which came into effect in 2011, provides penalties for bribery in the UK. Characteristics of this act include the prohibition of bribery not only to public officials but also in the private sector, recognition of both forms of bribery as criminal acts and the prohibition of facilitation payments.
Figure 1: Flow of processes for an anti-bribery, anti-corruption and competition law compliance program
Example of an external evaluation of the operational status of a competition law compliance program
Our client, a manufacturer headquartered in Japan, requested professional reviews and advice on the internal structure of their competition law compliance program. In response, PwC's forensic services practice provided the following support:
- Inspection of regulations and guidelines related to compliance with competition laws
- Interviews with relevant internal departments
- Periodic reviews of the implementation of the client’s compliance program
- Transaction testing analysis on the preparation and storage of relevant internal documents
- Review of educational and training systems, reporting systems and monitoring systems
Investigations related to violations of bribery, corruption and competition laws
If bribery or a similar incident is detected at your company, you’ll need to investigate the facts quickly and carefully, as you would with any other case of fraud. From investigation to analysis, our forensic services practice provides support for communication with internal and external stakeholders, and for reporting and response to investigations by the authorities. We can also help you track and manage the status of your incident response, formulate measures to prevent recurrence and additional countermeasures, and prepare improvement plan execution records and use them for future compliance measures.
Recently, the World Bank and other multi-lateral development banks (MDBs) have been conducting an increasing number of investigations of anti-corruption clauses in loan agreements. Violations of these clauses can result not only in large monetary penalties, but also other major consequences for companies operating globally. The MDBs, for example, may terminate existing loans and revoke the company’s eligibility to participate in subsequent bids.
We also provide support for companies subject to an on-site investigation from the Fair Trade Commission regarding violations of Japan’s antitrust laws. This support includes internal investigations prior to submitting a leniency application, and internal investigations following the on-site investigation.
We provide support for:
- conducting fraud investigations (analysing accounting records, reviewing emails and electronic data, conducting interviews with relevant parties, etc.) and
- incident response (responding to stakeholders, reporting to the authorities, implementing remedial measures, returning to business as usual etc.).
Figure 2: Major types of support for regulatory violations and incidents
Support for acquiring the ISO 37001 (anti-bribery management system) certification
In October 2016, the International Organization for Standardization released the International Standard for Anti-Bribery Management Systems (ISO 37001) which defines the standards to be included in anti-bribery compliance programs and regulations as a ‘common language’ for anti-bribery compliance. The report provides an overview of measures and controls for effectively preventing and detecting bribery by companies, their employees and their business partners. ISO 37001 references some of the world's leading anti-bribery regulations, guidelines and cases, such as the FCPA and the UK Bribery Act, and recommends measures to construct an industry-leading anti-bribery system.
When employees or managers are charged with bribery, the organisation’s responsibility may be reduced if their compliance program is aligned with ISO 37001. ISO 37001 can be a particularly useful tool for entities that are directly or indirectly involved in infrastructure development projects in developing countries or organisations that have direct or indirect contact with foreign civil servants.
The following figure shows examples of the measures covered by ISO 37001.
With our wealth of subject-matter knowledge and experience, PwC’s forensic services professionals can help you establish robust anti-bribery and corruption compliance programs that are aligned to ISO37001.
Figure 3: Support for acquiring the ISO 37001 (anti-bribery management system) certification
Anti-bribery and anti-corruption due diligence in M&A transactions
When acquiring another company, you need to not only conduct financial due diligence but also to identify the potential risks inherent to the company and its key executives. In particular, when investing in emerging markets and other foreign markets where the risk of corruption is high, it is important to obtain risk and corruption-related information about the acquisition targets before engaging in negotiations. This process is recommended by the US Department of Justice and the US Securities and Exchange Commission (see the FCPA Resource Guide*) and has been adopted by many companies in Europe and the Americas and by progressive Japanese companies.
In the early stages of an M&A deal with limited information on the target companies, PwC’s forensic services practice applies corporate intelligence methodologies to obtain information on the reputation, background and other corruption risks of the targets, their executives, major shareholders and business partners. When internal information is available, we conduct interviews and test compliance-sensitive transactions and third-party relationships to determine whether an adequate anti-corruption compliance program is in place and whether it has been implemented effectively.
If the due diligence process reveals a high risk of bribery or corruption, it may be necessary to reconsider the valuation and even the acquisition itself, or remediate any issues prior to finalising the deal.
Figure 4: Anti-bribery and anti-corruption due diligence workflow